TORONTO, April 29, 2008 – BPO Properties Ltd. (TSX: BPP) today announced financial results for the quarter ended March 31, 2008 and declared a special dividend for common shares of $7.25 per share, payable on June 30, 2008 to shareholders of record at the close of business on June 2, 2008. This special dividend is being funded from the company’s cash resources.
BPO Properties’ net income from continuing operations for the three months ended March 31, 2008 was $17.3 million ($0.46 per share) compared to $12.4 million ($0.27 per share) during the same period in 2007. BPO Properties’ net income for the three months ended March 31, 2008 was $17.3 million ($0.46 per share) compared to $59.3 million ($1.92 per share) during the same period in 2007. The prior period included a net gain of $45.3 million ($1.59 per share) on the sale of three non-core properties in Toronto and Ottawa.
Funds from operations was $37.4 million ($1.16 per share) for the three months ended March 31, 2008 compared to $37.2 million ($1.15 per share) during the same period in 2007.
MAJOR TRANSACTIONS
Arranged financing of three properties, totaling $122.4 million on a 100% basis, subsequent to the first quarter. The properties include 2 Queen Street East in Toronto, Altius Centre in Calgary, and Canadian Western Bank in Edmonton. The debt is interest only at 5.63% per annum and matures in December 2017.
Advanced developments under construction which are 72% leased in aggregate. In Toronto, the 1.2 million square foot Bay Adelaide Centre West Tower continues on budget and on schedule. The concrete core has reached the 27th floor, the structural steel is erected up to the 18th floor and the installation of the curtain wall has commenced. Total pre-leasing stands at 65%.
In Calgary, the 265,000 square foot Bankers Court project completed above-grade structural work to the sixth floor, nearing the halfway mark for the structure. Base building mechanical and electrical work is progressing and curtain wall installation is beginning. The building is 100% pre-leased.
Completed the disposition program for the non-core portfolio acquired from O&Y with the sale of Acres House in Niagara Falls for $13.4 million on a 100% basis, subsequent to the first quarter. Proceeds generated from the disposition program following the 2005 O&Y acquisition total approximately $200 million from the sale of 15 properties totaling 1.7 million square feet in Toronto, Calgary and Winnipeg for the company’s 25% ownership interest.
Refinanced the mortgage of 105 Adelaide Street West, Toronto, of $23.1 million. The loan bears interest at 5.32% per annum and matures in February 2013.
Declared a special common share dividend of $7.25 per share, totaling approximately $207 million, to be paid on June 30, 2008 to shareholders of record at the close of business on June 2, 2008. This special dividend is being funded from the company’s cash resources.
OPERATIONS REVIEW
BPO Properties continued its proactive leasing strategy in the first quarter of 2008. The portfolio was 98.4% leased at the end of the first quarter of 2008 – which remained unchanged from the previous quarter – compared to a Canadian national average of 94.0% at March 31, 2008. During the quarter, BPO Properties proactively leased 228,000 square feet of space, approximately two times the amount contractually expiring.
Transactional highlights from the first quarter include:
107,000 square feet in Toronto
- A five-year lease renewal with St. Michael’s Hospital at 2 Queen Street East for 25,000 square feet.
- Average eight-year leases with Ammirati Puris/Interpublic Group of Companies at Queen’s Quay Terminal for 24,000 square feet.
- A five-year new lease with Toronto Convention & Visitors at Queen’s Quay Terminal for 18,000 square feet.
87,000 square feet in Calgary
19,000 square feet in Edmonton
- Average two-year lease expansions with CGI Information Systems at Canadian Western Bank for 10,000 square feet.
15,000 square feet in other markets
OUTLOOK
“Although we have seen little evidence of fundamentals changing in our markets, we remain well-positioned in the face of softening economic conditions with a strong tenant base and conservative lease expiry profile,” said Tom Farley, President & CEO of BPO Properties. “For 2008, we remain focused on pro-active leasing and advancing our developments.”
*****
Net Operating Income and FFO
This press release and accompanying financial information make reference to net operating income and funds from operations ("FFO") on a total and per share basis. Net operating income is defined as income from property operations after operating expenses have been deducted, but prior to deducting financing, administrative and income tax expenses. BPO Properties defines FFO as net income prior to extraordinary items, one-time transaction costs, income taxes, non-cash items and depreciation and amortization. The company uses net operating income and FFO to assess its operating results. Net operating income is important in assessing operating performance and FFO is a relevant measure to analyze real estate, as commercial properties generally appreciate rather than depreciate. The company provides the components of net operating income and a full reconciliation from net income to FFO with the financial statements accompanying this press release. The company reconciles FFO to net income as opposed to cash flow from operating activities as it believes net income is the most comparable measure. Net operating income and FFO are both non-GAAP measures which do not have any standard meaning prescribed by GAAP and therefore may not be comparable to similar measures presented by other companies.
Forward-Looking Statements
This press release, particularly the “Outlook” section, contains forward-looking statements and information within the meaning of applicable securities legislation. Although BPO Properties believes that the anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward-looking statements and information because they involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information. Accordingly, the company cannot give any assurance that its expectations will in fact occur and cautions that actual results may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those set forth in the forward-looking statements and information include general economic conditions; local real estate conditions, including the development of properties in close proximity to the company’s properties; timely leasing of newly-developed properties and re-leasing of occupied square footage upon expiration; dependence on tenants' financial condition; the uncertainties of real estate development and acquisition activity; the ability to effectively integrate acquisitions; interest rates; availability of equity and debt financing; the impact of newly-adopted accounting principles on the company's accounting policies and on period-to-period comparisons of financial results; and other risks and factors described from time to time in the documents filed by the company with the securities regulators in Canada, including in the Annual Information Form under the heading “Business of BPO Properties – Company and Real Estate Industry Risks” and in the company’s annual report under the heading “Management’s Discussion and Analysis.” The company undertakes no obligation to publicly update or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, except as required by securities laws.
Dividend Declaration
The Board of Directors of BPO Properties declared a quarterly common share dividend of $0.15 per share, payable on June 30, 2008 to shareholders of record at the close of business on June 2, 2008. The Board also declared a special common share dividend of $7.25 per share, totaling approximately $207 million, to be paid on June 30, 2008 to shareholders of record at the close of business on June 2, 2008. This special dividend is being funded from the company’s cash resources.
The Board of Directors also declared dividends on series G, J and M preferred shares, payable August 14, 2008 to shareholders of record at the close of business on July 31, 2008, for the period May 14, 2008 to August 13, 2008. The dividend per preferred share is to be computed in accordance with the terms of the shares.
Conference Call
BPO Properties’ first quarter 2008 conference call can be accessed by teleconference on Tuesday, April 29, 2008 at 3:30 p.m. E.T. at 1-866-249-1361. The call will be archived through May 29, 2008 and can be accessed by dialing 1-800-558-5253, pass code # 21377906. The conference call can also be accessed by webcast on the BPO Properties website at
www.bpoproperties.com.
Supplemental Information
Investors, analysts and other interested parties can access BPO Properties' Supplemental Information Package on BPO Properties' Web site under the Investor Relations/Financial Reports section. This additional financial information should be read in conjunction with this press release.
BPO Properties Profile
BPO Properties Ltd., 89% owned by Brookfield Properties Corp., is a Canadian company that invests in real estate, focusing on the ownership and value enhancement of premier office properties. The current property portfolio is comprised of interests in 28 commercial properties totaling 18.3 million square feet and five development sites totaling 5.7 million square feet. Landmark properties include First Canadian Place in Toronto and Bankers Hall in Calgary. BPO Properties’ common shares trade on the TSX under the symbol BPP. For more information, visit
www.bpoproperties.com.
Contact
Investor relations and media inquiries should be directed to Melissa Coley, Vice President, Investor Relations and Communications at (416) 359-8593. Inquiries regarding financial results should be directed to Bryan Davis, Senior Vice President and Chief Financial Officer, at (416) 359-8612.
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CONSOLIDATED BALANCE SHEETS
|
(Millions)
|
March 31, 2008
|
December 31, 2007
|
|
|
|
|
|
Assets
|
|
|
|
Commercial properties
|
$1,345.8
|
$ 1,351.6
|
|
Commercial developments
|
505.2
|
452.5
|
|
Loans receivable
|
283.9
|
283.5
|
|
Tenant receivables and other assets
|
62.8
|
66.0
|
|
Cash and cash equivalents
|
57.6
|
37.7
|
|
Intangible assets
|
37.8
|
40.2
|
|
Assets related to discontinued operations
|
4.2
|
4.2
|
|
|
$2,297.3
|
$ 2,235.7
|
|
|
|
|
|
Liabilities and shareholders’ equity
|
|
|
|
Commercial and development property debt
|
$1,002.3
|
$ 965.5
|
|
Accounts payable and other liabilities
|
119.8
|
100.4
|
|
Intangible liabilities
|
81.6
|
85.0
|
|
Future income tax liabilities
|
43.7
|
41.3
|
|
Liabilities related to discontinued operations
|
0.7
|
3.0
|
|
Shareholders’ equity
|
1,049.2
|
1,040.5
|
|
|
$2,297.3
|
$ 2,235.7
|
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
|
|
Three months ended March 31
|
|
(Millions, except per share amounts)
|
2008
|
2007(1)
|
|
Commercial Properties
|
|
|
|
Revenue
|
$83.7
|
$80.7
|
|
Expenses
|
36.0
|
35.7
|
|
Net operating income
|
47.7
|
45.0
|
|
Loans and investment income
|
3.6
|
2.9
|
|
|
51.3
|
47.9
|
|
Expenses
|
|
|
|
Interest expense
|
8.8
|
8.3
|
|
General and administrative expenses
|
5.1
|
5.8
|
|
|
37.4
|
33.8
|
|
Depreciation and amortization
|
12.6
|
14.9
|
|
Income taxes
|
7.5
|
6.5
|
|
Net income from continuing operations
|
17.3
|
12.4
|
|
Discontinued operations
|
-
|
46.9
|
|
Net income and comprehensive income
|
$17.3
|
$59.3
|
|
|
|
|
|
Net income per common share
|
|
|
|
Continuing operations
|
$0.46
|
$0.27
|
|
Discontinued operations
|
-
|
1.65
|
|
Total
|
$0.46
|
$1.92
|
(1) Certain comparative information has been reclassified to conform with current year presentation.
RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS (“FFO”)
|
|
Three months ended March 31
|
|
(Millions)
|
2008
|
2007
|
|
Net income
|
$17.3
|
$59.3
|
|
Add:
|
|
|
|
Depreciation and amortization (i)
|
12.6
|
16.0
|
|
Income taxes (ii)
|
7.5
|
16.5
|
|
FFO and gains
|
37.4
|
91.8
|
|
Property disposition gains
|
-
|
(54.6)
|
|
FFO prior to property disposition gains
|
$37.4
|
$37.2
|
(i) Includes depreciation and amortization from discontinued operations of nil and $1.1 million for the three months ended March 31, 2008 and March 31, 2007, respectively.
(ii) Includes income taxes from discontinued operations of nil and $10.0 million for the three months ended March 31, 2008 and March 31, 2007, respectively.
FFO PER COMMON SHARE
|
|
Three months ended March 31
|
|
(Millions, except per share information)
|
2008
|
2007
|
|
FFO prior to property disposition gains
|
$37.4
|
$37.2
|
|
Preferred share dividends
|
(4.3)
|
(4.5)
|
|
Funds available to common shareholders
|
33.1
|
32.7
|
|
Weighted average shares outstanding
|
28.5
|
28.5
|
|
FFO prior to property disposition gains per common share
|
$1.16
|
$1.15
|
DISCONTINUED OPERATIONS
|
(Millions)
|
March 31, 2008
|
December 31, 2007
|
|
|
|
|
|
Assets related to discontinued operations
|
|
|
|
Commercial properties
|
$ 3.2
|
$ 3.2
|
|
Intangible assets
|
0.1
|
0.1
|
|
Tenant receivables and other assets
|
0.9
|
0.9
|
|
|
$ 4.2
|
$ 4.2
|
|
|
|
|
|
Liabilities related to discontinued operations
|
|
|
|
Accounts payable and other liabilities
|
0.7
|
3.0
|
|
|
$ 0.7
|
$ 3.0
|
INCOME FROM DISCONTINUED OPERATIONS
|
|
Three months ended March 31
|
|
(Millions, except per share information)
|
2008
|
2007
|
|
Property disposition gains
|
$ -
|
54.6
|
|
Revenue from discontinued operations
|
0.1
|
7.4
|
|
Operating expenses
|
(0.1)
|
(3.1)
|
|
Net operating income and gains
from discontinued operations
|
-
|
58.9
|
|
Interest expense
|
-
|
(0.9)
|
|
Funds from discontinued operations and gains
|
-
|
58.0
|
|
Depreciation and amortization
|
-
|
(1.1)
|
|
Income taxes
|
-
|
(10.0)
|
|
Net income from discontinued operations
|
$ -
|
$ 46.9
|
|
|
|
|
|
Net income per share – discontinued operations
|
$ -
|
$ 1.65
|